Changing the Culture of Waste

The U.S. Ambassador to an African nation asked his facility manager to order four flower pots for the embassy; nothing fancy, just four plastic flower pots. He came back and said, on second thought; order a truck load of them since there is a lot of money left in the facilities budget and it should all be spent. The facility manager ordered the pots, and when they arrived, four of them were placed where they were needed around the embassy compound. The rest were unloaded and placed out of sight behind a building, where they were left to slowly crumble in the blazing African sun.

This is a true story told to me by the facility manager who was required to buy the flower pots. Rather than being an anomaly or an isolated case, it is unfortunately the norm. When there is money left in a budget at the end of the year, all federal government managers actively seek ways to spend it. They would prefer to spend it on things they need, but they will spend it on anything.

The Department of State is notorious for spending up to half of its budget in August and September, which are the last two months of the fiscal year.
Otherwise honest and dedicated federal workers consistently make these egregiously wasteful spending decisions. These are people who are committed to defending our nation, promoting our interests worldwide, and working tirelessly to manage the massive federal government. When given the decision to waste money at the end of the fiscal year or return it to the Treasury, these loyal Americans will always choose to waste the money. Many of them say they hate the process and they hate themselves for doing it. If this is the case, one must ask why these good people always make such decisions.

At the risk of making the solution to a complex problem sound too simple, the answer is all about incentives. Federal employees must spend their entire budgets or risk a severe negative impact on their careers. Their annual evaluation will reflect poor budget management if they have not spent every dime under their control. It does not matter if there are legitimate reasons why the budget allocation was not spent; it just must be spent. Not one member of the Senior Executive Service got there due to consistently completing the mission while returning excess money to the Treasury.

The system should be reformed to reward managers for exceeding expectations in their performance, and if there are any funds remaining at the end of the fiscal year, reward them again for returning it to the Treasury. These rewards could be in the form of positive annual employee evaluation reports, public recognition, and monetary bonuses. Every school of management in the developed world promotes these simple incentives, but the U.S. government continues to ignore them.

Concerns about such changes include:

Congress has not produced a budget in years. They make federal agencies live on continuing resolutions, which makes it nearly impossible to effectively manage their expenditures.

If agencies return money to the Treasury or fail to spend it on time, it is likely Congress will reduce future budgets, regardless of the agency’s needs.

Managers might purposely underspend their budgets in an effort to enhance their careers or receive a monetary award.

None of these concerns override the need to spend the taxpayers’ money with integrity. The failure of Congress to adopt a budget does not justify making wasteful spending decisions at the end of the fiscal year, nor does the chance that the next year’s budget will be reduced. Universally-accepted incentives should not be withheld from an entire workforce simply because a few managers might attempt to abuse the system. The desired behavior should be rewarded and discipline should be imposed to minimize abuse.

Congress does not directly manage federal employees; that is done by the Office of Personnel Management (OPM), with a little help from the Office of Management and Budget. OPM develops policy on incentives, pay, and benefits for all federal employees, both civilian and defense. In my opinion, with a few strokes of the pen and a lot of leadership support, OPM could implement cost-cutting incentives for federal workers, improve morale of the entire federal workforce, enhance performance in every federal agency, and save the nation hundreds of billions of dollars per year.

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